Shanghai Luxury Home Prices Under Pressure
Luxury homes in Shanghai have come under pressure amid worries about China’s faltering economy, with some rich families cutting prices by 5 million yuan (US$691,140) to attract buyers, according to property agencies and consultancies. However, would-be buyers remain cautious, with most of them looking to bargain down prices even further amid the weak environment. The downward spiral for luxury homes in the mainland’s commercial and financial hub has added to bearish sentiment in China’s real estate market. Luxury homes in the city are defined as residential units priced at more than 50 million yuan, which includes penthouses, villas and some big flats located in the urban centre. According to a report by news portal Sohu, 53 transactions of lived-in homes worth more than 50 million yuan were completed in the first half of 2023. This number fell well short of market expectations. In 2022, when Shanghai endured a two-month citywide lockdown due to a resurgence in Covid-19 cases, 137 units of luxury homes changed hands, down 54 per cent from 299 units a year earlier. In 2020, there were 256 lived-in luxury home transactions. Last year, prices of luxury homes rose by about 10 per cent as buyers overwhelmingly outnumbered sellers, said You Liangzhou, who owns Baonuo, a property agency in Shanghai. However, currently there are about 5,000 luxury homes up for sale across the city, which has a population of 25 million, more than double the number of units available at the end of 2022, he added. The rarity of expensive homes in the mainland’s most developed metropolis was once the biggest driving force for sustained price increases. However, brokers are now scrambling to adapt to the new situation. Shanghai’s gross domestic product (GDP) expanded 3 per cent in the first quarter of this year, compared with 4.5 per cent growth for the whole of mainland China. Shanghai set a GDP growth target of 5.5 per cent for 2023, 0.5 percentage points higher than the national figure. However, a strong recovery in the “dragon head” of China’s economy has not been forthcoming since the end of strict pandemic measures, amid consumer reluctance to spend. Sam Xie, head of research at CBRE China, said some super-rich people still want to upgrade their homes but they are now taking a wait-and-see attitude. “Many rich people still think it is safer to invest in property than other assets,” he said. “They will come back [to domestic property] when prices become attractive.” More than 180,000 pre-owned flats in Shanghai are currently up for sale, up from about 100,000 in mid-March, according to data from E-house China Research and Development Institution. China’s central bank cut the five-year loan prime rate, a reference rate for mortgages, from 4.3 per cent to 4.2 per cent in June, but analysts say another 50 basis points reduction is needed to spur the housing market.
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